852.75 National Telephone Co./296

The Ambassador in Spain (Weddell) to the Secretary of State

No. 154

Sir: I have the honor to refer to the Embassy’s telegram No. 155, August 23 [22], 3 p.m.,15 regarding the situation of the Telephone Company, and to report certain interesting developments which have occurred recently as regards the relations between the Telephone Company and the Spanish Government.

As reported in the telegram under reference, in spite of the physical presence of Colonel Behn in his office in the Telephone Building in Madrid and the fact that he has been allowed to attend meetings, etc., the management of the Company has not in fact been returned to the majority stockholders of the Spanish Company, that is to say, the International Telephone and Telegraph group. The Spanish authorities have been maintaining entire control of the operations of the company, and Colonel Behn and his American collaborators have been given practically no say in its management. While Colonel Behn has seen the Minister for Foreign Affairs on two occasions and endeavored to impress upon him the desirability of returning the management of the company to the American group, his representations have met with evasive replies on the part of the Minister for Foreign Affairs, and no real progress appears to have been made.

On September 21st, however, Colonel Behn called at the Embassy and explained that he had seen the Minister of Finance at Madrid and, what was more important, the Minister of Commerce and Industry at Bilbao. He stated that he had informed the Minister of Commerce that providing the Government would turn over the management of the company to him—in other words, place it in the same status it occupied before the Spanish Civil War—he was prepared to take certain measures which would be of distinct benefit to Spain. These measures would consist of expanding the production capacity of the manufacturing plants owned by the I. T. & T. at Madrid and Santander [Page 844] to the extent of quadruplicating the number of employees in the Madrid plant and practically doubling the employees at the Santander plant. This would involve a great increase in the exportation of products from these plants resulting not only in benefit to Spanish labor but to an improvement in the foreign exchange situation of Spain. Colonel Behn stated that he had discussed this matter at some length with the Minister of Commerce, who appeared to be greatly interested in the proposition, and that he had left a complete memorandum with him dealing with the subject.

I should add parenthetically that Colonel Behn explained to me confidentially that should he receive the cooperation of the Spanish authorities it is his intention to bring certain equipment from the Paris factory of the I. T. & T., principally consisting of dies, to Madrid and utilize the Madrid plant for supplying the needs of the I. T. & T. throughout Latin America. He explained that the Paris factory of the I. T. & T. is now devoted wholly to supplying war materials to the French Government.

Colonel Behn informed me that the Minister of Commerce had stated that he would proceed to Madrid on September 23rd and would present this matter to General Franco and that it would in all probability be discussed at the meeting of the Council of Ministers to be held at Burgos on September 25th. Behn was extremely anxious that, without in any way sponsoring his proposition, the Embassy should indicate to the Ministry for Foreign Affairs the interest of the American Government in the obtaining of an equitable settlement of this problem. As I had planned to leave San Sebastián the morning of September 23rd for a motor trip to Vigo, Salamanca and Madrid, lasting approximately one week, and as it was consequently necessary for Mr. Scotten to remain in San Sebastián, I requested Mr. Ackerman, the Commercial Attaché, to proceed to Burgos and explain to the Under Secretary for Foreign Affairs my hope for an equitable arrangement of the problem of the Telephone Company. Mr. Ackerman consequently called upon Señor Bárcenas, the Under Secretary for Foreign Affairs, on September 22nd, and explained these matters to him. Señor Bárcenas explained at the outset that Colonel Behn had already discussed the matter with him and that he and the Minister for Foreign Affairs were very much interested in an arrangement of the difficulties of the Spanish company and that Colonel Behn kept him informed of all the developments. Bárcenas added that he, and he believed he was expressing the viewpoint of the Minister, was convinced that a settlement of the difficulties was in the best interest of Spain as well as the United States. He added that his interest led him to keep in close touch with Colonel Behn and that he would advise, as he has advised in the past, that this matter be handled tactfully [Page 845] and that efforts be made to avoid too much or too sudden pressure. He indicated that he was inclined to think there was strong opposition in certain parts of the Government and he thought it might be a question of personalities. Although Mr. Ackerman attempted to draw him out on this point, señor Bárcenas would not elaborate on this statement further but merely indicated that tact was essential and that progress must be made slowly.

As señor Bárcenas appeared to be fully aware of the proposed arrangement for increasing manufacturing in the Spanish plants of the I. T. & T., Mr. Ackerman did not go into the details regarding this matter but stated that the American Ambassador wished the Minister to know of his personal interest and the deep interest of the Government of the United States that an equitable arrangement be made at the earliest possible moment, so that the Minister could convey this statement to the Cabinet when it met on September 25th. Bárcenas replied that he would immediately bring this to the attention of the Minister and he was glad to have this statement so that the Minister might be aware of it when the subject was discussed at the Cabinet meeting.

Colonel Behn is entirely satisfied with the action taken by the Embassy and is hopeful that it will produce the results he desires. However, he explained that his proposal to the Spanish Government is his last trump and if it does not produce results he is at somewhat of a loss to know what further action to take. He has not been able to see Serrano suñer since his return to Spain on July 30th, and he explained that unless he is able to see him in the very near future in order to discuss the affairs of the Telephone Company, he will probably request the Embassy to arrange this interview for him.

Respectfully yours,

For the Ambassador:
Robert M. Scotten

Counselor of Embassy
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